(June 18) - As the economy weakens, banks are increasingly squeezing customers who overdraw their bank accounts.
For more than a year, Wachovia has been urging its employees not to refund too many overdraft fees because they "make up a big percentage of our revenue and is a HOT button among leadership," according to internal memos obtained by USA TODAY.
Bank of America and Washington Mutual, meanwhile, have jacked up their overdraft fees and made it easier for customers to be hit with multiple penalties.
The changes come as banks grapple with growing losses from bad mortgage loans. Overdraft fees have increasingly become a source of profits. Banks and credit unions collect about $17.5 billion in overdraft fees per year, the Center for Responsible Lending says.
Checking-account customers are "easy picking" for fees, says Jean Ann Fox of the Consumer Federation of America, because banks typically can take any money owed out of a customer's next deposit.
What banks are doing:
· In 2007, Wachovia put in place a tool that tells employees how much they can refund to customers hit by overdraft fees. The bank, in memos, also tells employees to "sell" a debit card with every account because it makes money when consumers use it.
"We are in an economy that is requiring us to tighten our belt and ensure that we are looking for every possible way to generate revenue," says a memo sent to employees in the Atlanta region on Jan. 17.
Responding to the memos, Wachovia spokeswoman Jennifer Darwin says the bank "work(s) hard to educate customers on how to avoid fees; however, we have a responsibility to shareholders to collect fees." Most customers don't pay overdraft fees, she adds.
· In April, Washington Mutual raised its overdraft fee in most states to $34 from $32. Also this year, the bank increased the number of times a day that a customer can be hit with this fee, from five to seven. Washington Mutual spokesman Gary Kishner says the bank raises fees partly due to "competitive factors."
· This year, Bank of America raised the fee charged on the first day a customer overdraws to $25 from $20. The bank also raised the number of times a customer can be hit with this fee per day to seven from five. And it's told customers that most signature debit-card transactions will reduce their balances that same day and be subject to fees if there isn't enough money in the account. Before, consumers often avoided this fee if they deposited money before a purchase cleared.
Bank of America spokeswoman Diane Wagner says the bank adjusts fees to "establish more uniform pricing for our national franchise."
Earlier this year, the Federal Reserve proposed a rule that bars financial institutions from charging a fee for paying an overdraft - unless customers have had the chance to opt out of this payment. Consumers can get more information about the proposal and directions for submitting comments to the Fed at www.regulations.gov; enter Docket R-1315 in the "comment or submission" field. Comments must be submitted by July 18.